Does information asymmetry lead to higher debt financing? Evidence from China during the NTS Reform period

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dc.citation.issue1
dc.citation.volume25
dc.contributor.authorQu W
dc.contributor.authorWongchoti U
dc.contributor.authorWu F
dc.contributor.authorChen Y
dc.date.accessioned2024-06-18T19:59:54Z
dc.date.available2024-06-18T19:59:54Z
dc.date.issued2018-07-16
dc.description.abstractPurpose: The purpose of this paper is to test an implication of the pecking order theory to explain capital structure decisions among Chinese listed companies during the 2005-2007 NTS Reform transition period. Design/methodology/approach: The authors utilize direct proxies for information asymmetry based on microstructure models including Probability of the arrival of informed trades (PIN), Adverse selection component of the bid-ask spread (λ), Illiquidity ratio (ILLIQ) and liquidity ratio, and Information asymmetry index (InfoAsy) to examine their relation with firms’ debt financing. Findings: Consistent with the prediction of Pecking Order Theory, the authors find that companies for which stock investors are challenged with more severe informational disadvantages are associated with higher degree of leverage use. Originality/value: The study provides a more direct test on the positive relation between information asymmetry and financial leverage of Chinese firms. In contrast to previous findings by Chen (2004), the results suggest that capital structure choices among Chinese firms progressively conform to conventional finance theories (e.g. Pecking Order Theory) with the decline of non-tradable shares.
dc.description.confidentialfalse
dc.format.pagination109-121
dc.identifier.citationQu W, Wongchoti U, Wu F, Chen Y. (2018). Does information asymmetry lead to higher debt financing? Evidence from China during the NTS Reform period. Journal of Asian Business and Economic Studies. 25. 1. (pp. 109-121).
dc.identifier.doi10.1108/JABES-04-2018-0006
dc.identifier.eissn2515-964X
dc.identifier.elements-typejournal-article
dc.identifier.issn2515-964X
dc.identifier.urihttps://mro.massey.ac.nz/handle/10179/69887
dc.languageEnglish
dc.publisherEmerald Publishing Limited
dc.publisher.urihttps://www.emerald.com/insight/content/doi/10.1108/JABES-04-2018-0006/full/html
dc.relation.isPartOfJournal of Asian Business and Economic Studies
dc.rights(c) 2018 The Author/s
dc.rightsCC BY 4.0
dc.rights.urihttps://creativecommons.org/licenses/by/4.0/
dc.subjectAsymmetric information
dc.subjectCapital structure
dc.subjectChinese market NTS Reform
dc.subjectG15
dc.subjectG32
dc.subjectPecking order
dc.titleDoes information asymmetry lead to higher debt financing? Evidence from China during the NTS Reform period
dc.typeJournal article
pubs.elements-id458237
pubs.organisational-groupOther
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